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The Meaning of Brexit

Jun 25, 2016Jeffrey D. Sachs
Brexit is a watershed event that signals the need for a new kind of globalization, one that could be far superior to the status quo that was rejected at the British polls. What is required, above all, is a shift from a strategy of war to one of sustainable development.

NEW YORK – The Brexit vote was a triple protest: against surging immigration, City of London bankers, and European Union institutions, in that order. It will have major consequences. Donald Trump’s campaign for the US presidency will receive a huge boost, as will other anti-immigrant populist politicians. Moreover, leaving the EU will wound the British economy, and could well push Scotland to leave the United Kingdom – to say nothing of Brexit’s ramifications for the future of European integration.

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Brexit is thus a watershed event that signals the need for a new kind of globalization, one that could be far superior to the status quo that was rejected at the British polls.

At its core, Brexit reflects a pervasive phenomenon in the high-income world: rising support for populist parties campaigning for a clampdown on immigration. Roughly half the population in Europe and the United States, generally working-class voters, believes that immigration is out of control, posing a threat to public order and cultural norms.

In the middle of the Brexit campaign in May, it was reported that the UK had net immigration of 333,000 persons in 2015, more than triple the government’s previously announced target of 100,000. That news came on top of the Syrian refugee crisis, terrorist attacks by Syrian migrants and disaffected children of earlier immigrants, and highly publicized reports of assaults on women and girls by migrants in Germany and elsewhere.

In the US, Trump backers similarly rail against the country’s estimated 11 million undocumented residents, mainly Hispanic, who overwhelmingly live peaceful and productive lives, but without proper visas or work permits. For many Trump supporters, the crucial fact about the recent attack in Orlando is that the perpetrator was the son of Muslim immigrants from Afghanistan and acted in the name of anti-American sentiment (though committing mass murder with semi-automatic weapons is, alas, all too American).

Warnings that Brexit would lower income levels were either dismissed outright, wrongly, as mere fearmongering, or weighed against the Leavers’ greater interest in border control. A major factor, however, was implicit class warfare. Working-class “Leave” voters reasoned that most or all of the income losses would in any event be borne by the rich, and especially the despised bankers of the City of London.

Americans disdain Wall Street and its greedy and often criminal behavior at least as much as the British working class disdains the City of London. This, too, suggests a campaign advantage for Trump over his opponent in November, Hillary Clinton, whose candidacy is heavily financed by Wall Street. Clinton should take note and distance herself from Wall Street.

In the UK, these two powerful political currents – rejection of immigration and class warfare – were joined by the widespread sentiment that EU institutions are dysfunctional. They surely are. One need only cite the last six years of mismanagement of the Greek crisis by self-serving, shortsighted European politicians. The continuing eurozone turmoil was, understandably, enough to put off millions of UK voters.

The short-run consequences of Brexit are already clear: the pound has plummeted to a 31-year low. In the near term, the City of London will face major uncertainties, job losses, and a collapse of bonuses. Property values in London will cool. The possible longer-run knock-on effects in Europe – including likely Scottish independence; possible Catalonian independence; a breakdown of free movement of people in the EU; a surge in anti-immigrant politics (including the possible election of Trump and France’s Marine Le Pen) – are enormous. Other countries might hold referendums of their own, and some may choose to leave.

In Europe, the call to punish Britain pour encourager les autres – to warn those contemplating the same – is already rising. This is European politics at its stupidest (also very much on display vis-à-vis Greece). The remaining EU should, instead, reflect on its obvious failings and fix them. Punishing Britain – by, say, denying it access to Europe’s single market – would only lead to the continued unraveling of the EU.

So what should be done? I would suggest several measures, both to reduce the risks of catastrophic feedback loops in the short term and to maximize the benefits of reform in the long term.

First, stop the refugee surge by ending the Syrian war immediately. This can be accomplished by ending the CIA-Saudi alliance to overthrow Bashar al-Assad, thereby enabling Assad (with Russian and Iranian backing) to defeat the Islamic State and stabilize Syria (with a similar approach in neighboring Iraq). America’s addiction to regime change (in Afghanistan, Iraq, Libya, and Syria) is the deep cause of Europe’s refugee crisis. End the addiction, and the recent refugees could return home.

Second, stop NATO’s expansion to Ukraine and Georgia. The new Cold War with Russia is another US-contrived blunder with plenty of European naiveté attached. Closing the door on NATO expansion would make it possible to ease tensions and normalize relations with Russia, stabilize Ukraine, and restore focus on the European economy and the European project.

Third, don’t punish Britain. Instead, police national and EU borders to stop illegal migrants. This is not xenophobia, racism, or fanaticism. It is common sense that countries with the world’s most generous social-welfare provisions (Western Europe) must say no to millions (indeed hundreds of millions) of would-be migrants. The same is true for the US.

Fourth, restore a sense of fairness and opportunity for the disaffected working class and those whose livelihoods have been undermined by financial crises and the outsourcing of jobs. This means following the social-democratic ethos of pursuing ample social spending for health, education, training, apprenticeships, and family support, financed by taxing the rich and closing tax havens, which are gutting public revenues and exacerbating economic injustice. It also means finally giving Greece debt relief, thereby ending the long-running eurozone crisis.

Fifth, focus resources, including additional aid, on economic development, rather than war, in low-income countries. Uncontrolled migration from today’s poor and conflict-ridden regions will become overwhelming, regardless of migration policies, if climate change, extreme poverty, and lack of skills and education undermine the development potential of Africa, Central America and the Caribbean, the Middle East, and Central Asia.

All of this underscores the need to shift from a strategy of war to one of sustainable development, especially by the US and Europe. Walls and fences won’t stop millions of migrants fleeing violence, extreme poverty, hunger, disease, droughts, floods, and other ills. Only global cooperation can do that.

Superficial analysis by Prof. Sachs, although with a limited range of good points. The writer of this article does not show enough knowledge of what's going on to be able to have a useful influence. Another illustration of why the people, those that work, are rejecting elites who sit in clean offices and pontificate.

Well thought out, rational and dispassionate, comprehensive, with propositions encompassing the fundamental issues that policies should deal with.

Policy guided by revenge is insane. The major issue is to save the planet, not to punish Russia, Syria, the United Kingdom, or Greece. Revenge at any cost is a symptom of political insanity that ultimately ends in disaster.

"All of this underscores the need to shift from a strategy of war to one of sustainable development, especially by the US and Europe."

What is needed for starters, in my view, is the recognition that war has become nothing more than the continuation of economics by other means.

The dominance of the economic paradigm in our time has come to monetize everything (not least war), elevated greed to a virtue, and discounted the value of the four ancient cardinal virtues to almost nothing.

This analysis and conclusions must have made President Putin a very happy man (if only there were more). However what seems to be most silly part of this analysis is it's recommendations.

1. It totally unrealistic and not only rewards Assad for being directly responsible for the death of hundred of thousand is also rewarding Iran for directly intervening in the affair of another country. What about the opposition? Will they simply vanish or are we to con conclude that they would also decimated by Assad and his supporters?

2. Last time I checked it is the Russian that invaded directly and overtly countries? To make them look like peace loving now is absurb. Putin has show time and again that he will use his military to achieve his goals of Russian egemony and the reconstruction of a buffer zone that protect on one side but, more importantly threatens on the other. This is nothing and if history has taught us anything, Russia's behavoir is one that has been consistant for the past 50+ years.

3. Reward Britain and what? This would inevitably invite other nations to leave. This however does not mean punishment of the UK. It will punish itself enough with the very distinct possibility of Scotland leaving. However Britain cannot have it both way. As for the future of Britain as the next Switzerland, this absolutely ludicrous. Neutrality does not work with atomic weapons and defense pact with US.

4. That is the only point that makes sense and should be explored. It is however very difficult to achieve this. What does make sense is to stop the petty measures imposed on a country like Greece. The display of bullying and threatening was not the best display of European unity, no matter the cicupstance.

5. That unfortunatelly and in the world we live in is a ferry tale. A global effort is needed here and perhaps the United Nation should finally rise up to the task and organize a serious review of poverty and standard of leaving in Africa in particular since this continent has more or less been abandoned by all and left to corporate greed and corruption.

Two cents from someone who has no particular in-depth knowledge of these issues but would like to think that common sense should dictate how we see issues of our time.

Great article with good proposals. I only wonder if US is willing to end wars around Europe and to risk a self sufficient Europe. It may be difficult for it "persuade" it.
Even if Brexit undermined the stability of European construction, there was a young generation which markedly voted for Europe. This may be characteristic for most of the member countries considering that the Europe has been around sufficient time to attached a generation to its value. This may be the force capable to develop the European Idea. Despite the policies which undermined mostly youth, creating unemployment rates reaching 40% among them, these people remain great supporters of the union.
It is mandatory to refocus policies aiming to (1)preserve financial stability (no debt reduction, low inflation rate) thus (2) preserving value of wealth favored by middle aged high equity individuals to investments in creating opportunities for youth. Failure to support them may lead to erosion of the last political pillar of the union and eventually to lose of the wealth because of the currency and assets depreciation.

Jeffrey, I’m afraid you are wrong in your opening statement. There are over 2 million brits living and working outside of the UK. These needed to be replaced somehow. The majority of the Brits are very much used to migrants more so than any other country in the EU, put simply this is due primarily to their imperial history and of course their relationship with the commonwealth countries. The real cause of the Brexit is one and one only it is called “inequality”. The gap in wealth, or the lack of it, widened significantly between the various counties in the UK and this was reflected in the voting results. This inequality gap was due to a combination of the ill-conceived UK and EU policies under the banners of austerity and reforms. The EU is everything you described and much more, but in this specific case the EU was a scapegoat, the real culprit is Mr Preacher in DC and I did mention this a while back, when I said that he managed to open every single Pandora’s box he could get his hands on and he went on the lookout for even more. There are six more months to go, god save us all.

THE BRUSSELS TEA PARTY PERHAPS THE SEQUEL THAT THE BOSTON TEA PARTY FINALLY BEGETS.

Greece was unable to deliver what Great Britain was always ready to deliver - and Germany eventually delivers.
Should Brexit lead to the end of NATO - perhaps the final nail in The Seventy Years of Peace in Europe.
The Majority incumbency perhaps has overplayed - The Fatal Miscalculation of 2016.
The Past is NEVER dead.
IT IS NOT EVEN PAST.

Westminster now is centre stage in a Battle reminiscent of Waterloo.
Brexit 2016 is a watershed moment.
Unfortunate.
But Inevitable.

A new kind of globalization would be all nations sharing their excess resources so that all may develop within their traditions. Sharing creates justice; justice brings peace. ISIS should become a political party and allow its ideology to be judged in the marketplace of ideas.

I believe that there is a large part of the UK population that has been ignored by the mainstream parties in Westminster. Yes there was an element of racism in the vote, a little similar to how Golden Dawn in Greece tried to push their fascist ideology during the Grexit vote before the left mobilised and chased them out.

David Cameron. He's the man who pushed thousands of disabled people into poverty. He's the man who made it harder to sign on, and harder to find work. He's the man who oversaw the normalisation of zero-hours contracts and bogus "self-employment" for millions, and made it harder for trade unions to defend workers.

He's the man who hiked tuition fees, privatised Royal Mail, and accelerated the privatisation of the NHS. He's the man who cut housing benefit, banned squatting, created the London housing crisis, and turned homelessness into an ordinary thing.

He's the man whose bombing of Libya, and stoking of the Syrian crisis, led to the deaths of hundreds of thousands, and the displacement of millions more.

He got away with it for six long years, by dividing his opponents, playing blame games, and buying time with risky referendums. He promoted the rise of UKIP to split the Labour vote; to turn people against one another.

Even by the standards of his own side, he did badly: he set the events in motion that will lead to the collapse of two empires, that of both the EU, and the UK.

Can we all just reflect for a moment on the fact that on June 23rd, the most powerful force in these islands - the English working class - brought Cameron down.

It's astonishing how none of you economists seem to appreciate the depth of anger among the "externalities" in your models, ie the middle classes of the developed world, which have been decimated by globalization. This is reflected in the "Perhaps a few bullet points can fix things" attitude here. You simply don't get it.

The "hypothesis" of economists about modern globalization has failed, utterly, after a thirty year experiment, and the masses across the developed world in particular are increasingly aware of it. As a result, there is a profoundly disturbing global middle class revolution developing, and it is unstoppable at this point. And condescendingly telling them to read Ricardo so they'll understand the virtues of "free" trade and globalization isn't helping, by the way.

Your "economic theories" and "economic models" have now reached a point where they have destabilized the entire planet. The flawed implementation of globalization has spiraled out of your control, and it is too late to do anything about it. All we can do now is try to minimize the violence that will ensue, and find some way to prevent economists from inflicting further pain and suffering on humanity.

And the revolution is just beginning. Brexit is simply, as noted, a watershed event, the catalyst that will unleash the pent up anger that nobody wanted to talk about at Davos.

And let's not overlook the power of social media, which is a variable not found in the spreadsheets of economists, and which was not available to the Luddites. The power of the network, fueled by profound and widespread economic anxiety that transcends borders, is extraordinary, and we are one technologically-advanced demagogue away from social unrest that many would consider inconceivable. See: ISIS.

And, unfortunately, Europe is done. Finished. Toast. The EU has failed, and there is simply no hope for the wonderful people of Europe. The Euro experiment will go down in history as a failure of the same magnitude as the Bolshevik Revolution in terms of the damage inflicted on the masses. An entire generation has had their economic future stolen from them by feckless, incompetent bureaucrats in Brussels and the capitals of Europe. And Europe, I suspect, is where the descent into chaos will begin. Again.

And finally, who would like to volunteer to be the one to break the news to the angry masses that the solution that economists have come up with to all of the problems caused by globalization and technological "progress" is not a new strategy for economic growth and shared prosperity, but is rather the Universal Basic Income? Raise your hand. Anybody?

If you're not terrified of what the future holds, you're simply not paying attention. The problem is that the elites haven't been paying attention, and the consequences are going to be dire, indeed.

Do you look at the world when you type this argument or only to your belly button, ie, developed countries' realities?
The worlds underdeveloped countries, at least the ones not facing war, have improved absurdly both in poverty reduction and economic development during the last decades. (See china, brazil, india, chile, korea, south africa etc)
Gains from trade are not the product of a model, they are a fact: working since the begining of human societies.
The real human kind drama are the borders themselves...

The old economic order is rotten and outdated, but a revolution born of anger normally brings something worse in its wake. The sense of schadenfreude will be short lived, and then the angry mob turn on their own kind. See Stalin, Hitler and Mao for example.

Simple, honest, and based on common sense. Enormous benefits can be derived from these proposals. Thank you for speaking for so many of us. The challenge, as is always the case, is one of Political Will -- the willingness on the part of those who have created these problems to stop! That generally never happens peacefully. But, change always happens, and these simple and common sense proposals provide viable direction for such Change, when it does come about.

The central question is whether the emerging renewed class war will be diverted into (and exploited as) a smoldering inter-ethnic and inter-cultural warfare by anti-modernist, nationalist and neo-feudalist forces . In the populist movements of countries like Russia, Hungary, Poland, the Netherlands, France, Israel, India, Britain, the United States and even in Switzerland we can see conscious or semi-conscious pacemakers for the next, terrible and uncontrollable clashes between people who hoped to live in peace within societies open to dialogue and to free exchange of knowledge, opinions, goods and services after 1989 .

Jeffery, There is no certainity of war in Europe. There is a certainity on current trends of water shortage in a belt around the world provoking conflict and concurrently developing country populations doubling in a matter of decades. No amount of aid will eliminate that process, sorry but its a farcical idea. There is a strong correlation between water shortage and conflict already and as water shortage spreads conflict will grow

The biggest threat to Europe stability is how it deals with migrantion and how the world defines a refugee. The definition of the refugee and how they are treated is recent and is based on minority transient events not massive ongoing flows. Like it or not border control will become an issue and Greece as a key border is not possible to control, its border is too porous and geographically fragmented. Turkey as a contracted border guard is not possible to control. There will be no EU expansion to include a would be partner who offers no advantage. The definition of a refugees is already being massaged by declaring some countries 'safe' but it highly unlikely this wheeze will keep up with the problem

EU border locations which are porous will become holding camps for processing, its already establishing itself as a event. In terms of border control it is obvious it would be better for the EU if Greece was not in the EU. A half-life where Greece is in but not treated as being in the EU may be a creeping progression, that is part of the GR condition already, its a zombi state

The nationalist movement in growth and so hated by the EU elite is simply motivated - if you wont look after our local interests we will. As the conflict between federalism and local interests is not resolvable the long term prospect for the Union are not good and the life in denial in the ivory tower does not help resolution

It is quite likely the labour cost disadvantage France has versus Germany cannot be dealt with effectively so within 3 years unbearable pressures will mount amongst the French electorate

Decades of work has gone into putting all the dominos in place and the defenders of the dominos are deaf to others concerns. Chaos is invited and bizarrely those doing the invite think they are better than chaos. They are not and their cognitive bias is they think they can imagine a controlled end, which is what Cameron did in the UK. Fools rush in where angels fear to tread

According to this article, one may conclude that the time turns for republican veiw in US and all around the world. It means that some areas will defenetely close their boarders. On the other hand, it is a starting point when many minority nationalities, areas and territories will demand their independence or exit from various unions and some devided nations will defenetely unite. It is understandable that for true, peaceful and equal globalization processes, minority areas in different parts of the world should get their independence and self-determination. And we all know that there are still a lot of countries which have a real problem with minorities, who are from totally different language or cultural group but living in their own territories. In this technological stage of development of human beings it is vital for nations for fair and equal allocation of new balances and roles. One good example is Kazakhstan's countribution to the United Nations for resolving above mentioned issues with its unique approaches.

The NATO expansion is frightening. The threat of nuclear war with Russia is real, and yet news organizations don't even cover what is going on, or cover it with complete ignorance and one-sidedness. The USA seems to enthusiastically want war with Russia, and is doing everything it can to see that it happens, including violating treaties and understandings that occurred when the Soviet Union broke up. I very much appreciate that you are adding your voice opposing NATO expansion, as it is a rare thing and so needed. Thank you.

Getting out of the EU [and NATO] is a rational way forward for not only for the other rich countries but also for the poor ones eg Ireland, which has suffered from a tsunami of immigration in exchange for what? Eyesore development grants. The EU's middle name is " unsustainable development". Schumacher's " Small is Beautiful" was right. I don't think much of Empires and EU contraptions because they are anti democratic, anti local control.

See also:

In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats.

Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.

A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

The Bollywood film Padmavati has inspired heated debate, hysterical threats of violence, and a ban in four states governed by the ruling Bharatiya Janata Party – all before its release. The tolerance that once accompanied India’s remarkable diversity is wearing thin these days.

The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

The US decision to recognize Jerusalem as the capital of Israel comes in defiance of overwhelming global opposition. The message is clear: the Trump administration is determined to dictate the Israeli version of peace with the Palestinians, rather than to mediate an equitable agreement between the two sides.